Jamin S. Soderstrom, Bar No. 261054 2 jamin ...

Case 2:17-cv-01941 Document 1 Filed 03/10/17 Page 1 of 33 Page ID #:1

1 Jamin S. Soderstrom, Bar No. 261054

2

jamin@ SODERSTROM LAW PC

3 3 Park Plaza, Suite 100

4

Irvine, California 92614 Tel: (949) 667-4700

5 Fax: (949) 424-8091

6

7 Counsel for Plaintiff and the Proposed Class

8

9

UNITED STATES DISTRICT COURT

10

CENTRAL DISTRICT OF CALIFORNIA

11

12 GRANT MCKEE, individually and on 13 behalf of all others similarly situated,

Case No. 2:17-CV01941

14

Plaintiff,

CLASS ACTION COMPLAINT

15 v.

16 AUDIBLE, INC. and , DEMAND FOR JURY TRIAL 17 INC.,

18

Defendants.

19

20

21

Complaint Filed: ___________

22

Trial Date:

None Set

23

24

25

26

27

28

1 CLASS ACTION COMPLAINT

Case 2:17-cv-01941 Document 1 Filed 03/10/17 Page 2 of 33 Page ID #:2

1 I. NATURE OF THE ACTION

2

1. Plaintiff Grant McKee brings this lawsuit on behalf of a proposed Class of

3 consumers who find themselves trapped in a shell game created by the online audiobook

4 seller Audible, Inc. (Audible), and its parent company , Inc. (Amazon)

5 (collectively, Defendants). When he and other consumers signed up for an audiobook

6 purchasing plan with Audible, styled a "membership," Mr. McKee and other consumers

7 relied on Defendants' representations and believed that, on a monthly or annual basis,

8 they would purchase a certain number of prepaid "credits" that could be redeemed with

9 Audible for an equivalent number of audiobooks. Plaintiff and these consumers also

10 believed Defendants' representations that "one credit equals one audiobook," that

11 audiobook credits would "never expire," and that a member can cancel any time with "no

12 strings attached." But Defendants' advertisements represent almost the exact opposite of

13 how Audible membership plans really work.

14

2. In reality, once members accrue a certain number of prepaid credits, their

15 credits begin to expire to "make room" for new credits. Effectively, members stop

16 receiving additional credits for their payments but are still charged as if they were.

17 Members also forfeit all previously purchased credits if they ever cancel their plans. This

18 makes Defendants' advertisements demonstrably false: one credit does not equal one

19 audiobook; audiobook credits do expire; and a major string attached to cancelling a plan

20 is complete and immediate forfeiture of all unredeemed, prepaid credits. Every expired

21 or forfeited credit is a cash loss for the consumer and an equivalent cash windfall for

22 Audible.

23

3. Defendants' unlawful and unfair business practices do not stop there.

24 Defendants lure consumers to sign up for Audible membership plans with an advertising

25 tactic where members join for a free trial membership and a free audiobook credit but are

26 then are charged in perpetuity thereafter according to an "automatic renewal" policy. But

27 Audible and Amazon do not properly disclose to consumers all of the required "automatic

28 renewal" payment and cancellation terms at the point of sale (e.g., the online "purchase"

2

Case 2:17-cv-01941 Document 1 Filed 03/10/17 Page 3 of 33 Page ID #:3

1 box consumers are asked to click). As a result, Plaintiff and Class members have been

2 charged regularly and automatically without being fully informed of the consequences

3 and related cancellation policy as required by law.

4

4. Defendants also include unconscionable and unlawful provisions in the

5 terms and conditions of use they impose on consumers. For example, the terms imposed

6 on Audible members authorize Audible to charge any credit card linked to a member's

7 separate Amazon account if the credit card given directly to Audible is declined for any

8 reason. Defendants assert this authorization and make such charges without notice, even

9 if the other cards on the member's Amazon account belong to a non-Audible member

10 (e.g., spouse, relative, friend, business). Based on this alleged authorization, potentially

11 thousands of Amazon customers have had credit cards unlawfully charged by Audible

12 without notice simply because they use a common Amazon account that stores

13 information for multiple credit cards.

14

5. Ultimately, there is no legal or business justification for Defendants' bait-

15 and-switch tactics, which begin the moment a consumer first views their websites and

16 which continue through cancellation of the consumer's membership plan. Plaintiff

17 respectfully asks this Court to certify this lawsuit as a nationwide class action with

18 specified subclasses; appoint him as class representative; appoint Soderstrom Law PC as

19 class counsel; and award damages, restitution, and all other relief to which Plaintiff and

20 class members are entitled.

21 II. PARTIES

22

A. Plaintiffs

23

i. Named Plaintiff Grant McKee

24

6. Grant McKee is a citizen of California and resident of Los Angeles County,

25 California.

26

7. Mr. McKee signed up for a Free Trial membership with Audible in June

27 2016, which gave him a free credit to redeem for an audiobook. After 30-days, he started

28 purchasing a prepaid credit each month under an Audible "Gold Monthly" membership

3

Case 2:17-cv-01941 Document 1 Filed 03/10/17 Page 4 of 33 Page ID #:4

1 plan. As a Gold Monthly plan member, Mr. McKee designated one credit card for

2 Audible to charge for monthly payments of $14.95. His plan was automatically renewed

3 each month, and the payments were charged to his credit card.

4

8. Mr. McKee signed up for an Audible membership relying on Audible's and

5 Amazon's marketing and advertisements, including representations that one credit equals

6 one audiobook, his membership plan included one audiobook each month, credits do not

7 expire, and there are no strings attached if he cancels his membership plan. Based on

8 Audible's and Amazon's representations, Mr. McKee believed that, in exchange for his

9 payments, he would accrue one credit each month and that each of these prepaid credits

10 was the equivalent of purchasing an equal number of audiobooks. Mr. McKee made

11 payments on his plan even though he never received full disclosure of Defendants'

12 automatic renewal payment policy and cancellation policy.

13

9. Mr. McKee redeemed multiple prepaid credits he purchased during his

14 membership with Audible in exchange for audiobooks. However, he decided to cancel

15 his Audible membership plan in December 2016 before he had redeemed all of the

16 prepaid credits that he had accrued on his Audible account. Mr. McKee intended to

17 redeem his two remaining prepaid credits as soon as he found a new audiobook that

18 interested him. But upon cancelling his membership plan, he learned that--contrary to

19 Audible's and Amazon's representations--the credits he had purchased but not yet

20 redeemed had automatically and immediately expired and that, due to his cancellation,

21 he had forfeited the money he paid for the credits without receiving audiobooks.

22

10. Mr. McKee was not refunded any of the money he paid for unredeemed

23 credits when he cancelled his membership plan.

24

11. Mr. McKee's reliance on Defendants' representations caused him to

25 maintain his Audible membership plan from June 2016 to December 2016. Defendants'

26 false, misleading, and unfair representations have directly caused Mr. McKee to suffer

27 harm because he would not have purchased or maintained his membership plan, or he

28 would not have paid the same amount of money for his plan, had he known the truth

4

Case 2:17-cv-01941 Document 1 Filed 03/10/17 Page 5 of 33 Page ID #:5

1 about Defendants' advertisements and related policies and practices.

2

ii. Unnamed Class Members

3

12. Plaintiff brings this action on behalf of thousands of consumers in California

4 and nationwide that are similarly situated and subject to Audible's and Amazon's same

5 unlawful advertisements, business practices, and online terms and conditions of use.

6

13. Defendants' business records contain the information necessary to

7 determine the specific facts and circumstances of class members' Audible membership

8 plans, the expiration or forfeiture of their prepaid credits, the unconscionable terms and

9 conditions imposed on them, and any unauthorized credit card charges.

10

B. Defendants

11

i. Defendant Audible, Inc.

12

14. Audible, Inc. is a corporation formed and existing under the laws of the State

13 of Delaware, with its principal place of business in the State of New Jersey.

14

15. Audible is a subsidiary of Amazon.

15

16. Audible describes itself as a leading provider of spoken audio entertainment,

16 information, and educational programming on the Internet. Audible markets and

17 advertises its audiobook services on its website----among other

18 places.

19

ii. Defendant , Inc.

20

17. , Inc. is a corporation formed and existing under the laws of

21 the State of Delaware, with its principal place of business in the State of Washington.

22

18. Amazon is the parent corporation of Audible.

23

19. Amazon markets and advertises Audible's services on Amazon's website--

24 --among other places.

25 III. JURISDICTION AND VENUE

26

20. This Court has jurisdiction over the subject matter of this action under 28

27 U.S.C. ?? 1331 (federal question jurisdiction), 1332 (diversity jurisdiction), and 1367

28 (supplemental jurisdiction).

5

Case 2:17-cv-01941 Document 1 Filed 03/10/17 Page 6 of 33 Page ID #:6

1

21. This Court also has jurisdiction under the Class Action Fairness Act of 2005,

2 28 U.S.C. ?? 1332(d) and 1453, because the amount put in controversy by this class

3 action exceeds $5,000,000, there are more than 100 proposed class members, and at least

4 one member of the proposed class and one of the Defendants are citizens of different

5 states (CAFA jurisdiction).

6

22. This Court has personal jurisdiction over Defendants because (a) a

7 substantial portion of the wrongdoing alleged in this Complaint took place in California,

8 (b) both Defendants are authorized to do business in California, have sufficient minimum

9 contacts with California, and have intentionally availed themselves of the markets in

10 California through the promotion, marketing, and sale of products and services in

11 California, and (c) the exercise of jurisdiction by this Court is permissible under

12 traditional notions of fair play and substantial justice.

13

23. Venue is proper in this District under 28 U.S.C. ?? 1391(b)(1) and (2)

14 because both Defendants have a significant presence in California and a substantial part

15 of the events and omissions that give rise to Plaintiff's and Class members' claims

16 occurred in this District. Venue is also proper under California Code of Civil Procedure

17 section 395.5 and California Business and Professions Code section 17203.

18 IV. DEFENDANTS' WRONGFUL CONDUCT

19

A. Defendants' Misrepresentations

20

24. Audible offers consumers so-called "membership plans" where consumers

21 sign up for free and then start making monthly or annual payments in exchange for credits

22 which they can later redeem for audiobooks.

23

25. Across all of their advertising efforts, Defendants represent to consumers

24 that:

25

a. Under any of the Audible membership plans, "one credit equals one

26

audiobook";

27

b. An Audible membership plan "includes 1 audiobook each month";

28

c. "Membership credits do not expire as long as you have a

6

Case 2:17-cv-01941 Document 1 Filed 03/10/17 Page 7 of 33 Page ID #:7

1

membership . . . and stored credits are `rolled over' to your next

2

billing cycle, either monthly or yearly"; and

3

d. There are "no strings attached" if a consumer wants to cancel an

4

Audible membership plan because "you can cancel anytime" and

5

"your audiobooks stay in your Audible library" even after you cancel.

6

26. Plaintiff and proposed Class members relied on the above representations

7 and similar ones displayed on Defendants' websites, among other places, when signing

8 up for membership plans and purchasing prepaid credits redeemable with Audible for

9 audiobooks. And Defendants specifically and intentionally used these representations to

10 induce consumers like Plaintiff to sign up for automatically renewing membership plans.

11 But in Defendants' inconspicuous fine print, they concede that the plans do not work as

12 advertised. Defendants' own words prove that their representations to consumers are

13 demonstrably false or, at the very least, misleading and deceptive.

14

27. Defendants represent to consumers that their credits will never expire, while

15 stating the exact opposite in the fine print: "Once you have reached the roll over limit for

16 your membership plan, your oldest credit(s) will expire in order for you to receive new

17 credits." Defendants justify this policy by explaining that consumers "lose" their credits

18 to "make room" for new credits. They further caution consumers (again in an

19 inconspicuous disclosure) that "if you accrue too many credits and do not use them, you

20 may lose some."

21

28. But like any shell game, Defendants' justification is sleight-of-hand.

22 Audible's storage of consumers' prepaid credits takes up no physical inventory space;

23 accruing prepaid credits is purely a matter of digital accounting. Thus, Defendants' "use

24 `em or lose `em" explanation is just a convenient, deceptive euphemism. Defendants use

25 this explanation to avoid calling the prepaid credits what they really are: prepaid gift

26 certificates or gift cards that are redeemable for audiobooks but that have unlawfully

27 short expiration periods.

28

29. Defendants likewise represent to consumers that there are "no strings

7

Case 2:17-cv-01941 Document 1 Filed 03/10/17 Page 8 of 33 Page ID #:8

1 attached" to changing or cancelling a membership plan. Defendants do not explain up

2 front, however, that membership credits immediately expire when consumers cancel their

3 memberships (or when Audible cancels them itself). Audible simply notes in fine print

4 that "membership credits do not expire as long as you have a membership . . . ."

5 Defendants' practices seek to bind consumers to a perpetual membership plan while

6 concealing the harsh consequences of cancellation: immediate and automatic expiration

7 and forfeiture of all prepaid, unredeemed credits.

8

30. These facts show how each of Defendants' advertisements is demonstrably

9 false or, at a bare minimum, highly misleading and unfair. One credit does not equal one

10 audiobook because a credit can expire before it is redeemed. Membership does not

11 include one audiobook each month; rather, it includes a prepaid credit that can expire or

12 be forfeited for various reasons. And at least one major string attached to the

13 cancellation policy (a noose, really) is that a consumer forfeits all prepaid but

14 unredeemed credits immediately and automatically simply by cancelling his or her

15 membership plan.

16

31. Defendants' representations and related practices wrongly compel

17 consumers to continue paying for plans and prepaid credits that they no longer want or

18 maintain a higher membership level than they would prefer (e.g., a "Platinum Monthly"

19 membership wherein a consumer purchases two prepaid credits each month), under the

20 threat of losing the credits for which they had already paid.

21

B. Defendants' Violations of Gift Card Laws

22

32. Defendants further exploit consumers by attempting to circumvent state and

23 federal laws governing the distribution of gift certificates or gift cards. Such laws either

24 prohibit expiration dates outright or require gift cards and gift certificates to remain valid

25 for at least five years.

26

33. Audible purports to sell its members prepaid "credits" redeemable for

27 audiobooks. But despite their label, Audible credits are actually subject to gift card or

28 gift certificate laws because: they are redeemable only by Audible; they are issued in a

8

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